6 Ways To Cut Credit Card Debt

Credit cards can be convenient tools for making everyday and special purchases without the burden of taking cash with you when you shop. When used responsibly, they can also help you establish a positive credit record, which improves your ability to obtain mortgages and other large loans in the future. Unfortunately, the convenience that cards provide can make it easy to accumulate an unmanageable amount of debt. If you are looking for ways to reduce or eliminate your unsecured debt, these strategies can help you regain control over your finances:

#1. Emergencies Only – Cut Credit Card Debt

Avoid using your cards for anything except for emergency purchases. The most important strategy for debt reduction is preventing the accumulation of additional unsecured debt. It is nearly impossible to make a significant impact toward debt elimination if you are still using your cards for day to day purchases. You can greatly reduce your reliance on cards by leaving all but one of your cards at home and locked in a safe place. The remaining card should be kept for emergency expenses.

#2. Get A Pre-paid Credit Card

Obtain a pre-paid credit card. Typically, you can obtain a pre-paid card even if you have a high debt-to-income ratio or you have missed payments on other accounts. Load a modest amount from your earnings to the card each time you are paid by your employer or business. Over time, you will build an available balance that you can use for everyday and emergency purchases. Once you have accumulated a sufficient balance, carry your pre-paid card and lock away the remaining card you have been carrying for emergency purposes.

#3. Transfer To Low Interest Rate Cards

Consider transferring high-interest balances to a low-interest credit card. You might be able to obtain a card with a zero-interest or low-interest introductory period for balance transfers. Because most or all of each payment goes to the principal balance during the introductory period, you can effectively reduce your debt without increasing your monthly payment. If you opt for this strategy, though, it is important to close the account from which you transfer your balance. Otherwise, you might be tempted to charge additional purchases to the account, which works against your debt reduction efforts. Also, you should make sure that the new card’s standard interest rate is not higher than your existing rate – this can hamper your efforts if you are unable to eliminate the balance by the end of the introductory period.

#4. Fess Up About Spending Habits

Take the time to evaluate your spending habits. Most consumers find that they make unnecessary purchases that could be eliminated to free up more money for debt reduction. By making small changes to your spending habits, you could find additional money in your budget to pay down your unsecured debts. It is not necessary to live like a pauper to use this strategy – even skipping a few lattes a week can make a significant impact and help shorten your debt elimination timeline by months or even years.

#5. Set Your Target And Focus

Choose a credit card balance you want to pay off and focus your efforts on that account. This can be significantly more effective than trying to reduce all of your card balances at the same time. Once you have eliminated one card balance, you can use the funds you would ordinarily pay on that card to pay down another account. Some consumers choose the card with the highest interest rate, while others choose the card with the lowest rate. You can also tackle the account with the highest or lowest balance. All of these strategies have their advantages and disadvantages; however, the important thing is to choose a strategy and commit to it until your unsecured debt is gone.

#6. Build A Buffer

Build a substantial savings buffer once you have eliminated your credit card debt. After you have strategically paid off your cards, you will have plenty of room in your budget to contribute a portion of your income to savings. If your earnings are deposited directly into your bank account, you can simplify this process by having your employer deposit a portion of each pay into a separate savings account. This reduces the temptation to spend your money before you have a chance to save it. Over time, this strategy will provide the funds you need for special purchases and emergency expenses, which means that you might never have to rely on credit cards again.

Although credit debt elimination requires discipline and focused attention, the work you put into this endeavor will save you worry and increase your financial stability.

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